The Lucrative World of College Sports
A New Era of Investment
College athletic programs, particularly football, have never been more lucrative. With multibillion-dollar television deals, the transfer portal, and the escalation of NIL deals for athletes, private equity and venture capital enterprises are now looking to buy in. Schools with the most valuable athletic programs are in the best position to capitalize.
Football: The Cash Cow
Football generates roughly 75% of athletic program revenue at typical Power 4 schools, which include the ACC, Big Ten, Big 12, and SEC conferences. The expanded College Football Playoffs, kicking off on December 20, will further boost revenue. ESPN’s six-year extension for the rights to the games through 2031 is worth an average of $1.3 billion annually, more than double the previous deal.
The SEC: A Super-Conference
Experts believe the SEC will leapfrog the Big Ten with the richest television deal when its current agreement expires in 2033-34. “The SEC is almost a super-conference and, because of its football teams, owns the most valuable content in college sports,” said Irwin Kishner, a partner at Herrick Feinstein.
Private Equity Enters the Scene
Private equity firms have been permitted to own limited partner stakes in professional sports leagues like Major League Baseball, the NBA, NHL, and MLS. Now, they’re turning their attention to college programs. Institutional investors like Collegiate Athletic Solutions would provide capital to help grow a school’s athletic revenue, taking a cut in return.
Driving Profits Higher
Outside investors could drive profits even higher by bringing business acumen to college sports. “There’s a big opportunity to drive EBITDA higher in college sports because there are easy ways to maintain quality while reducing expenses,” said Kishner.
Schools’ Incentive
A $2.8 billion settlement between the NCAA and the five largest conferences would award compensation to 14,000 students who were previously prevented from earning endorsement money. Schools have an incentive to bring on outside investors to stay competitive and avoid economic disparity.
The Future of College Sports
While the move to private equity is complicated, bankers and attorneys believe it’s only a matter of time before private equity invests in college athletic programs. Florida State has been working with JPMorgan Chase to raise institutional capital, and other schools are likely to follow suit. The future of college sports is about to get a whole lot more lucrative.
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